Segment Information

6 Months Ended

Jun. 30, 2025

The Company operates its business through four reportable segments that align to the Company’s product categories: Sleep Health, Respiratory Health, Diabetes Health, and Wellness at Home. A description of the products and services provided within each of the Company’s four reportable segments is provided below.

Sleep Health

The Sleep Health segment provides sleep therapy equipment, supplies and related services (including CPAP and BiLevel services) to individuals for the treatment of obstructive sleep apnea.

Respiratory Health

The Respiratory Health segment provides oxygen and home mechanical ventilation equipment and supplies and related chronic therapy services to individuals for the treatment of respiratory diseases, such as chronic obstructive pulmonary disease and chronic respiratory failure.

Diabetes Health

The Diabetes Health segment provides medical devices, including continuous glucose monitors and insulin pumps, and related services to patients for the treatment of diabetes.

Wellness at Home

The Wellness at Home segment provides home medical equipment and services to patients in their homes including those who have been discharged from acute care and other facilities. The segment tailors a service model to patients who are adjusting to new lifestyles or navigating complex disease states by providing essential medical supplies and durable medical equipment.

The CODM evaluates performance of the reportable segments based on Adjusted EBITDA, which is the primary measure of segment profitability. The CODM uses Adjusted EBITDA to evaluate segment operating performance, generate future operating plans, and to assist with the evaluation of strategic business decisions, including potential acquisitions or divestitures, and whether to invest in certain products or services. Adjusted EBITDA excludes interest expense, net, income tax expense (benefit), depreciation and amortization, including patient equipment depreciation, equity-based compensation expense, change in fair value of the warrant liability, goodwill impairment, litigation settlement expense (gain), gain on sale of businesses, and certain other non-recurring items of expense or income that the Company does not consider part of its reportable segments’ core operating results. Adjusted EBITDA includes certain centrally incurred corporate and shared function costs, which are allocated to the reportable segments based on methodologies designed to correlate with each segment’s consumption of the related cost. Segment assets are not regularly provided to the CODM and therefore have not been disclosed.

The following tables present segment net revenue, significant segment expenses, and other segment items that are included in the Company’s reported measure of segment profit or loss for the three and six months ended June 30, 2025 and 2024 (in thousands):


	Three Months Ended June 30, 2025
	Sleep Health		Respiratory Health		Diabetes Health		Wellness at Home		Total
Net revenue	$	334,689	170,450		144,961		150,272		$	800,372
Less:
Cost of product and supplies (a)	105,863		31,717		109,426		70,747		317,753
Labor cost (a) (b)	81,377		56,494		13,110		32,247		183,228
Other operating expenses (a) (c)	32,674		15,323		2,088		10,776		60,861
Other segment items (d)	34,001		17,955		14,785		16,245		82,986
Adjusted EBITDA	$	80,774	$	48,961	$	5,552	$	20,257	$	155,544


	Three Months Ended June 30, 2024
	Sleep Health		Respiratory Health		Diabetes Health		Wellness at Home		Total
Net revenue	$	331,555	161,386		151,189		161,845		$	805,975
Less:
Cost of product and supplies (a)	106,211		23,788		106,931		77,732		314,662
Labor cost (a) (b)	78,435		51,972		12,945		36,553		179,905
Other operating expenses (a) (c)	32,186		11,491		4,295		12,082		60,054
Other segment items (d)	34,088		17,825		16,231		17,895		86,039
Adjusted EBITDA	$	80,635	$	56,310	$	10,787	$	17,583	$	165,315


	Six Months Ended June 30, 2025
	Sleep Health		Respiratory Health		Diabetes Health		Wellness at Home		Total
Net revenue	$	651,040	335,931		283,805		307,478		$	1,578,254
Less:
Cost of product and supplies (a)	214,062		65,771		213,495		151,301		644,629
Labor cost (a) (b)	162,097		110,553		26,087		66,794		365,531
Other operating expenses (a) (c)	65,479		30,149		3,944		24,345		123,917
Other segment items (d)	65,001		35,019		28,339		32,336		160,695
Adjusted EBITDA	$	144,401	$	94,439	$	11,940	$	32,702	$	283,482


	Six Months Ended June 30, 2024
	Sleep Health		Respiratory Health		Diabetes Health		Wellness at Home		Total
Net revenue	$	656,889	321,649		302,045		317,889		$	1,598,472
Less:
Cost of product and supplies (a)	209,502		57,227		207,820		155,316		629,865
Labor cost (a) (b)	156,467		101,653		25,939		72,135		356,194
Other operating expenses (a) (c)	63,924		25,756		5,993		24,502		120,175
Other segment items (d)	66,825		35,344		30,946		35,323		168,438
Adjusted EBITDA	$	160,171	$	101,669	$	31,347	$	30,613	$	323,800

(a)These expense categories align with the segment-level information that is regularly provided to the CODM and are considered significant to the segment in accordance with ASU No. 2023-07, Segment Reporting ("Topic 280"). The expense categories included in the tables above exclude amounts for patient equipment depreciation since these amounts are not reflected in the segment measure of profit or loss. Refer to the section below, titled Patient Equipment Depreciation, for discussion of such amounts.

(b)Excludes salaries, labor and benefits for corporate employees. Salaries, labor and benefits for corporate employees are included within Other segment items.

(c)Other operating expenses primarily include costs relating to rent and occupancy, facilities, fleet, and other operating costs.

(d)Other segment items include allocated costs related to various general and administrative functions, including revenue cycle management, customer service, technology and communications, sales and marketing, billings and

collections, accounting and finance, executive administration, human resources, information technology and legal and compliance.

The following table presents a reconciliation of total Adjusted EBITDA to consolidated income before income taxes for the three and six months ended June 30, 2025 and 2024 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Total Adjusted EBITDA	$	155,544	$	165,315	$	283,482	$	323,800
Interest expense, net	(27,533)		(33,038)		(55,932)		(65,510)
Depreciation and amortization, including patient equipment depreciation	(92,360)		(91,162)		(186,705)		(184,038)
Equity-based compensation expense (a)	(6,131)		(5,218)		(11,427)		(9,751)
Change in fair value of warrant liability (b)	—		7,010		—		(443)
Goodwill impairment (c)	—		(6,548)		—		(13,078)
Gain on sale of businesses (d)	32,225		—		32,225		—
Litigation settlement gain (expense) (e)	—		1,760		—		(3,345)
Other non-recurring expenses, net (f)	(10,026)		(10,340)		(15,153)		(14,355)
Income before income taxes	$	51,719	$	27,779	$	46,490	$	33,280

(a)Represents equity-based compensation expense for awards granted to employees and non-employee directors.

(b)Represents a non-cash gain or charge for the change in the estimated fair value of the warrant liability. See Note 12, Stockholders' Equity – Warrants, for additional discussion of the non-cash gain or charge. These warrants expired on November 8, 2024.

(c)Represents non-cash goodwill impairment charges relating to an immaterial business disposal during 2024.

(d)Represents the pre-tax gain associated with the dispositions of two businesses within the Company's Wellness at Home segment. See Note 4, Disposals, for additional discussion of such gain.

(e)The expense for the six months ended June 30, 2024 consists of a $2.4 million charge for the change in fair value of shares of Common Stock of the Company that were issued in July 2024 following final court approval of a previously disclosed securities settlement, as well as an expense of $0.9 million to settle a shareholder derivative complaint.

(f)The expense for the six months ended June 30, 2025 consists of $9.2 million of consulting expenses associated with asset dispositions (of which $5.1 million relates to contingent success fees from the sales of businesses), $2.0 million of consulting expenses associated with systems implementation activities, $1.1 million of transaction costs associated with acquisitions, and $2.8 million of other non-recurring expenses. The expense for the six months ended June 30, 2024 consists of $6.9 million of consulting expenses associated with systems implementation activities, $2.8 million of expenses associated with litigation, a $1.6 million write-down of assets, $0.9 million of consulting expenses associated with asset dispositions, and $2.2 million of other non-recurring expenses.

Patient Equipment Depreciation

The following table presents the amounts of patient equipment depreciation by reportable segment for the three and six months ended June 30, 2025 and 2024 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Patient equipment depreciation:
Sleep Health	$	38,592	$	42,563	$	76,797	$	84,930
Respiratory Health	29,800		22,010		60,916		43,815
Diabetes Health	2,300		2,188		4,570		3,956
Wellness at Home	11,473		13,006		23,813		28,577
Total patient equipment depreciation (1)	$	82,165	$	79,767	$	166,096	$	161,278

(1)Patient equipment depreciation is included in Cost of net revenue in the accompanying consolidated statements of operations. Patient equipment depreciation is not reflected in the segment measure of profit or loss but the CODM regularly reviews this information by reportable segment.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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+ Details

AdaptHealth Corp. 10-Q